Legislation Has Passed!

In 2017, Pennsylvania passed a large-scale legalization of online gambling. This allowed online poker, online casinos and sportsbooks. Currently, Pennsylvanians are poised to have a variety of new options for wagering in addition to the physical casino locations where they can currently bet. Although operators have been slow to enter the market, there have been recent developments that signify that the online gambling market may be robust in Pennsylvania.

The First Approved Entrants

Recently, three casino operators have received regulatory approval to begin online operations in Pennsylvania. The casinos are expected to commence operations within the coming months, by next spring at the latest. Nine total operators had applied for licenses and four additional operators are expected to apply for some form of a license shortly.

Surprisingly, Mt. Airy Casino seems like it may be one of the most viable players in the Pennsylvania online gambling marketplace. Mt. Airy is a smaller casino located in the Poconos region of Pennsylvania, but its partnerships and plans indicate that it intends to be a strong competitor in the marketplace. Mt. Airy usually ranks in the lower half of casinos in the state in terms of total revenues, yet its online presence is expected to be robust. Mt. Airy was one of the first three casinos to gain approval to commence online operations. Mt. Airy has signed partnerships with 888 and PokerStars. For Mt. Airy, online gambling is a way to catch up to other Pennsylvania casinos in terms of revenues by broadening its customer base. Its locations in the Pocono Mountains otherwise prevents it from growing foot traffic and its revenues fell 13 percent in July.

At the other end of the spectrum, the largest Pennsylvania casino was also one of the first three operators to receive online licenses. Parx Casino, which has long been established on the outskirts of Philadelphia, far outpaces nearly all of the other casinos in the state except for Sands in terms of revenues. Parx had been the first operator to take the risk of submitting a license application, notwithstanding the $10 million application fee. Parx had lobbied to prevent the legalization of online gambling in an attempt to protect its profitable land-based operations. Parx intends to offer a fully integrated betting platform, having submitted an application in August 2017 for a sports wagering license. For Parx, online gaming is an attempt to grow its revenues, which have been flat in recent months.

The third operator to receive approval was Harrah’s Philadelphia. Like Mt. Airy, Harrah would be relying on online gambling to turn around its sagging fortunes after experiencing a nine percent revenue drop in July. Harrah’s intends to offer online poker, table games and slots. Harrah’s figures to be a leading operator in the online poker space with a partnership with WSOP. Although the poker room must bear Harrah’s branding, WSOP is a big name that has the potential to place Harrah’s at the top of the market. Harrah’s primary casino partner will be Caesar’s, and the partnership has indicated that it will promote online table games over slot machines.

Online Lottery Controversy

Recently, plans for online lottery contests have sparked controversy and litigation on the part of casino operators. The Pennsylvania Lottery began offering iLottery games in June 2018, and immediately they were a large success. In the first month of operation, iLottery signed up 45,000 customers and recouped close to $3 million in revenue. It is possible that the iLottery can sell in excess of $1 billion annually in sales.

The gambling pie, while not finite, is hardly unlimited. A popular new stream of gambling revenue may have an impact on the casinos’ revenues and may impact their online gambling plans. With that in mind, in June 2018, the casinos requested that the Pennsylvania governor shut down the online lottery, a request that was not granted. The casinos’ primary complaint is that certain iLottery games are close approximations of online casino games and represent competition for them. The casinos claim that certain iLottery games are precluded by language in the bill that legalized online gambling that defines the extent of online games that the Pennsylvania Lottery can offer. In August 2018, the casinos filed suit against the Pennsylvania Lottery, seeking an injunction to shut down simulated casino games. One of the areas of complaint is that the Pennsylvania Lottery is open to players aged 18 years or older, while the traditional casino games offered online may not be played by those under 21 years of age. The casinos believe that the steep licensing fees that they have paid entitle them to not be required to compete in the market with the state that requires large licensing fees.

Other Regulatory Controversies

In addition to issues surrounding the iLottery and high taxes, casino operators have other issues with the new Pennsylvania gambling laws. One major issue that operators have raised is the ban on online gambling that physically occurs at land-based casinos. Players are prohibited from signing up for online accounts and making deposits while physically present at land-based casinos. The rationale for the ban is that the state feels that is it necessary to prevent competition with land-based casinos. According to the casinos, this is an unreasonable precaution. In their view, land-based casinos provide an entry in gambling and customers may want to sign up for accounts with that specific casino as opposed to with another casino.

Additionally, online casino operators are unhappy with the requirement that players only have one account per each operating platform. This requirement persists even if there are multiple skins for the same platform. This may serve to raise operating costs. This is part of Pennsylvania’s regulatory preference for limiting skins. According to the casinos, this may suppress marketing and innovation and makes Pennsylvania a less friendly jurisdiction in which to do business. Nevertheless, due to the high population in the state, casino operators have all made the decision to enter the market notwithstanding the regulatory challenges to doing business there.

Sam Shefrin is the founder of Lineups.com, Inc. Before Lineups, he started Daily Fantasy Cafe, Inc. in 2014. Armed with a passion for sports and every Atlanta team, his journey continues with the goal of making Lineups a premier sports analytics destination. He has been quoted on Forbes.com for industry insight and his websites featured on NBATV, Yahoo! Sports, Fantasy Pros, Bleacher Report and SB Nation.